Taxes and Time Allocation: Evidence from Single Women
Hundreds of papers have investigated how incentives and policies affect hours worked in the market. This paper examines how income taxes affect time allocation in the other two-thirds of the day. Using the Panel Study of Income Dynamics from 1975 to 2004, we analyze the response of single women's housework, labor supply, and other time to variation in tax and transfer schedules across income levels, number of children, states, and time. We find that when the economic reward to participating in the labor force increases, market work increases and housework decreases, with the decrease in housework accounting for approximately two-thirds of the increase in market work. Analysis of repeated cross-sections of time diary data from 1975 to 2004 shows that changes in "home production" account for at least half of the increase in market hours of work in response to policy changes. Data on expenditures from the Consumer Expenditure Survey from 1980 to 2003 show some evidence that expenditures on market goods likely to substitute for housework increase in response to a greater incentive to join the labor force. The baseline estimates imply that the elasticity of substitution between consumption of home and market goods is 2.43. The results are consistent with the classic time allocation model of Becker (1965).
We thank Raj Chetty, David Cutler, Daniel Hamermesh, Erik Hurst, Lawrence Katz, Louis Kaplow, Bruce Meyer, Claudia Olivetti, Daniel Sacks, Karl Scholz, Daniel Silverman, Todd Sinai, Justin Wolfers, and seminar participants at Harvard, IIES, NBER, the National Tax Association, the Nordic Summer Institute in Empirical Labor Economics, SOFI, Stanford, the Stockholm School of Economics, UBC, the University of Wisconsin-Madison, Uppsala, and Wharton for suggestions. We are grateful to Adam Looney, Bruce Meyer, and Mel Stephens for generously sharing data. We are also grateful to Mark Aguiar and Erik Hurst for making their data and code available on the web. Daniel Sacks provided outstanding research assistance. Gelber acknowledges financial support from the National Institute on Aging, Grant Number T32-AG00186. All errors are our own. Email: firstname.lastname@example.org. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Taxes and Time Allocation: Evidence from Single Women and Men, with Joshua W. Mitchell, Review of Economic Studies 2012, 79(3), 863-897 (lead article; earlier version circulated as NBER Working Paper 15583, "Taxes and Time Allocation: Evidence from Single Women").